Real Estate Tip of the Week: What’s a Proof of Funds Letter?
Being a homebuyer means more than just becoming a homeowner – you’re suddenly being asked to track all financial aspects of your life while trying to understand real estate jargon! But don’t fear, Alliance Title is here!
If you’re a serious homebuyer, your real estate agent might ask you for a proof of funds letter. Now, what’s that?
A proof of funds letter proves that you have enough liquid cash to purchase a home. While it might not be a surprise that a lender will research your finances to ensure you have the cash to close the deal, it might not be so obvious to know that the home sellers will want that proof as well. Your agent might ask for this letter, as well as your pre-approval letter from your lender, to confirm that you’re a serious buyer and ready to pass over the cash.
Hold up. You might be wondering what the difference is between a pre-approval letter and a proof of funds letter.
A pre-approval letter comes directly from your lender, whereas a proof of funds letter is a completely separate document. You can get this letter from your bank – or whatever institution you use to hold your money. Essentially, the homeowners want to see that your money truly exists. After you contact your bank and request a proof of funds letter, you can usually expect to get it within a day or two, but it might be best to give yourself a week. You’ll want this letter before you write an offer on the home.
Your real estate agent will know the right time to pass over this letter to the sellers (whether that’s when you submit an offer or after your offer as been accepted).
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